European releases overnight: December Forecast Actual
U.K. Jobless Claims Change - 5.0K - 6.4K
U.K. Claimant Count Rate +2.5% +2.5%
Euro-zone CPI (MoM) +0.4% +0.4%
Euro-zone CPI (YoY) +3.1% +3.1%
Euro-zone CPI Core (YoY) +1.9% +1.9%
Overnight European releases were pretty close to forecasts and don’t really add any spice to the mix. Indications still point lower for the economy while inflationary pressures remain, notably the highest annual inflation reading from Germany at +2.2% over 2007.
And goodness me, the arch hawk Weber comments that high inflation levels “should not be dramatized.” Against that Stark pushed the ECB “party line” that price stability fosters growth – and that implies another rate hike. Enter Trichet of the gnashing teeth today for a speech but don’t expect any change in comments…
U.S. releases overnight:
December Forecast Actual
U.S. CPI (MoM) +0.2% +0.3%
U.S. CPI (YoY) +4.1% +4.1%
U.S. CPI Excl food & energy (MoM) +0.2% +0.3%
U.S. CPI Excl food & energy (YoY) +2.4% +2.4%
U.S. Industrial Production (MoM) - 0.1% +0.0%
U.S. Capacity Utilization 81.3% 81.4% January
U.S. NAHB Housing Market Index 19.0 19.0 U.S. numbers were pretty unremarkable as well but from the “cup half full” perspective the numbers didn’t deteriorate – and that includes the NAHB index which remained at 19. However, that does cover the fact that November’s number was revised down to 18. The Beige Book for the January 30th meeting identified 7 regions with mildly increased activity, 3 were lower and 2 mixed. Sales were weak overall and the housing market still sluggish. Demand for skilled workers was steady, for non-financial services good. On growth the committee noted continued growth but at a reduced pace. Elsewhere more banks are reporting continued not only a worsening in lending conditions, but forecast that it will continue to deteriorate. It seems that consumers are struggling to pay debts, falling behind on credit card payments, mortgages and car loans. It’s more evidence that the impact of the subprime problems have over spilled into the rest of the economy. Banks are already increasing their write-offs on such loans and expect the trend to continue. The Beige Book and the credit quality imply a 25bp cut at a minimum, probably 50bp and forget the current market hype that there may be 75bp… That’s pure pie in the sky stuff… Those that listen to my weekly comments on FX Street will know that I have highlighted consumer confidence as a key pointer to the next stage in this saga. With 50% of U.S. GDP coming from consumer spending any loss of confidence and spending will be the last straw in tipping the economy into a recession. The government knows this too – and the Wall Street Journal – which has reported that a stimulus deal may be possible. It is reported that a top House Democrat said Congress and the White House can come to an agreement on an economic-stimulus package -- provided Republicans don't insist the plan includes making President Bush's signature tax cuts permanent. It will happen. The political will is there. It’s Presidential election year and no one wants to go into a new term amid chaos. Also timely is the reaction to former Treasury Secretary Lawrence Summers who still holds great respect in the Congress. His speech yesterday proposed a fiscal stimulus plan to prod the economy back into life. “If delivered in the second and third quarters of 2008,” he said, “it could have a material impact on consumers and on confidence more generally.” Frankly, in the true world of politics it will just be papering cracks but who knows, it may even be enough to prop up the Dollar.
More later once the daily analysis has been done…
The following are economic releases from Asia due today:
Australia
December BOP Imports (P) (MoM)
January Consumer Inflation Expectations Japan
November Industrial Production (F) (MoM) - 1.6%
November Industrial Production (F) (YoY) +2.9%
December Bankruptcies (YoY) | 
